What caused the credit crisis that came to national attention in September of this year? Certainly a number of factors all contributed, just as a number of factors would ultimately contribute to the collapse of a bridge. But any such collapse can be traced back to a single defective component. For a bridge, it may be a lynch pin or a truss cross-member. For the credit markets, it is the Community Reinvestment Act of 1977 (CRA).
Investor’s Business Daily says this bluntly in their November 28th Editorial & Opinion piece. But they also expose the reasons why the Democrats want nothing to do with repealing the CRA or changing it in anyway. From their editorial:
|The Community Reinvestment Act is to blame for the financial crisis, but it so powerfully serves Democrats’ interests that they’ll do anything to protect it — including revising history.
The CRA coerces banks into making loans based on political correctness, and little else, to people who can’t afford them. Enforced like never before by the Clinton administration, the regulation destroyed credit standards across the mortgage industry, created the subprime market, and caused the housing bubble that has now burst and left us with the worst housing and banking crises since the Great Depression.
The CRA should be abolished, along with the government-sponsored enterprises that fueled the secondary market for subprimes — under pressure from Clinton, who ordered HUD to set quotas for “affirmative action” lending at Fannie Mae and Freddie Mac.
But powerful Democrats in Washington want to protect the act — along with Fannie and Freddie — and spin the subprime scandal as the result of too little regulation, not too much.
The Dems are repeating the lie that the subprime lending crisis was a result of de-regulation. That is simply not true and anyone with even the most basic understanding of economics can see this. The truth is that it was over-regulation that brought us to the current state of affairs.
|Repealing or weakening the CRA would be a mistake,” warns Senate Banking Committee Chairman Chris Dodd, D-Conn., who argues that the CRA should be strengthened.
Dodd, the top recipient of Fannie donations and himself a beneficiary of a sweetheart mortgage brokered by a subprime lender, recently invited one of Clinton’s top enforcers of the CRA to testify.
“The notion that CRA has caused this problem is a pernicious thought,” said former Comptroller of the Currency Gene Ludwig. “These are not truthful statements. The CRA has helped to create a better and sounder world for finance, not the opposite.”
Dead wrong. But the mainstream media believe it, and have attacked those, including this paper, who dare to tell the truth about the crisis. Already the debacle has erased $13 trillion in wealth, while putting taxpayers on the hook for up to $8 trillion in bailouts.
Yep. Sen. Dodd sure makes aot of money off of this mess. It is pretty clear why he wants to keep the CRA in place as well as lie about what the CRA is really doing to the economy.
How many more lies are going to come out of the Democrats’ collective mouth before we voters see the truth and hold the libs accountable for what they are doing?
Here is the true history of the CRA mess versus the lies the Democrats are trying to get everyone to believe:
|Fact: The 1977 law was only lightly enforced until Clinton added teeth to it in 1994 and launched an anti-redlining campaign against banks, led by Ludwig, Housing Secretary Henry Cisneros (and later Andrew Cuomo) and Attorney General Janet Reno that lasted into this decade.
Minority homeownership rates, which had been flat, began a steep rise in 1995, and home prices soon followed, stoked by easier lending. Numerous bank officials complain that they still feel pressured by CRA regulators to make inner-city loans they know are at great risk of defaulting.
Myth: The CRA could not have led to financial Armageddon, because the overwhelming share of subprime mortgages came from lenders that were not banks and not regulated by the CRA.
Fact: Nearly 4 in 10 subprime loans between 2004 and 2007 were made by CRA-covered banks such as Washington Mutual and IndyMac. And that doesn’t include loans made by subprime lenders owned by banks, which were in effect covered by the CRA.
Myth: The CRA did not force anyone to do subprime loans or take excessive risks.
Fact: Subprime loans were the vehicle banks used to satisfy CRA compliance, and Clinton and his regulators encouraged their use. Before Clinton took office, subprimes were virtually unheard of. By the time he left, they made up more than 9% of the market for mortgage originations. Today they’re 20%.
Myth: Greedy investment bankers, who securitized and sold subprime mortgages, drove us to the credit crisis, not government.
Fact: Clinton’s regulatory policies led to the creation of this new risk on Wall Street. His CRA amendments created the subprime market, and only after he pressured Fannie and Freddie to socialize the risk and guarantee the profit from the subprime loans did Wall Street get involved in a big way.
Is somebody actually doing something about this? Yes. In the House of Representatives, there are two bills that address these problems. First, HR 7264 would repeal the CRA. Second, HR 7094 would dissolve Fannie Mae and Freddie Mac.
Write your Representatives and ask them to support these bills.
You can access the complete article on-line here:
Stop Covering Up And Kill The CRA
Investor’s Business Daily
November 28, 2008
Filed under: Economy, Government, Politics Tagged: | Chris Dodd, Clinton Administration, Community Reinvestment Act, CRA, Gene Ludwig, HR 7094, HR 7264, HUD, IndyMac, Janet Reno, Subprime loans, Washington Mutual